Question
Suppose you are offered a perpetuity of $100 per day, starting tomorrow and continuing forever. For simplicity just assume there are exactly 365 days in
Suppose you are offered a perpetuity of $100 per day, starting tomorrow and continuing forever. For simplicity just assume there are exactly 365 days in every year. Find the rate of return for which that perpetuity is equivalent to a present payment of $1,000,000? Using your calculated annual rate of return, answer the following question:
If you are told that instead of getting a perpetuity, you will get the daily payment of $100 for 14 years (that means you get 365 payments for each of those years) and after that time payments will cease, what is the new Net Present Value?
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